Verizon CFO Shammo: "We did not anticipate that amount of growth in the network"

Verizon's network wasn't ready for the flood of new traffic that it had to deal with after the company rolled out LTE service, admitted CFO Fran Shammo.

Fran Shammo

Speaking on a conference call with investors hosted by Wells Fargo on Tuesday, Shammo said that Verizon had to back away from its all-you-can-eat data plans in a hurry, thanks to a major spike in demand.

“What we saw happen when you move from a 3G to a 4G network, the consumption of data increased tremendously,” he said. “And we knew that if a small percent did that, what happens when you get a large percent moving? You have to be able to monetize your capital investment somehow.”

Shammo declined to specify exactly how much more data an LTE customer consumes than a 3G one, but said that the ratio was “more than two.”

The trend could slow slightly, however, once smartphone saturation really kicks in.

“Smartphone net-add is going to start to slow,” said Shammo. “It’ll still continue to grow, I think, at least for Verizon for the next two years or so, but that’s going to continue to slow.”

What’s more, Verizon is planning to grow its infrastructure substantially, Shammo added, saying that the company will increase capital expenditures by $500 million this year. He named New York, San Francisco and Chicago as the cities with the biggest congestion problems, and, therefore, the focus of Verizon’s build-out efforts.

The company can afford to focus exclusively on capacity, Shammo said, in part because it has essentially completed its build out of geographic coverage.

“We’re done with coverage,” he said. “We’ll be in the capacity game.”

Email Jon Gold at jgold@nww.com and follow him on Twitter at @NWWJonGold.